Meta Platforms reported stronger-than-expected third-quarter 2026 earnings, supported by robust advertising revenue and growing engagement across Facebook and Instagram. The technology giant also announced a new nonvoting share class as it accelerates investment in artificial intelligence infrastructure.
Meta’s quarterly revenue climbed 26% year-over-year to $64.60 billion, exceeding Wall Street expectations of $63.33 billion.
The company also surpassed analysts’ earnings forecasts and issued an optimistic revenue outlook for the fourth quarter. Meta shares initially rose approximately 4% following the announcement.
Meanwhile, investors assessed the company’s plans to expand AI spending and introduce a new share structure designed to support its long-term growth strategy.
Meta Q3 Earnings Beat Wall Street Expectations
Meta reported diluted earnings per share (EPS) of $3.83 for the quarter ending September 30, 2026.
The result exceeded analysts’ consensus estimate of $3.57 per share and compared with $1.05 in the corresponding period last year.
Net income reached $9.86 billion, up from $2.71 billion a year earlier.
However, the company’s reported earnings included a substantial legal expense.
Meta recorded a $9.89 billion charge related to an agreement with 52 US state attorneys general concerning litigation over the impact of social media on teenagers’ mental health.
The settlement significantly affected operating profitability despite the company’s strong revenue performance.
Excluding the legal charge and its related tax effects, Meta reported adjusted earnings per share of $7.40.
Facebook and Instagram Advertising Revenue Surges 26%
Advertising remained the primary driver of Meta’s quarterly growth.
The company’s advertising revenue increased 26% to $63.06 billion, reflecting continued demand for digital advertising and improvements in monetization.
Chief Executive Mark Zuckerberg highlighted record engagement levels across Facebook and Instagram.
Higher user engagement, improved content recommendations and AI-powered advertising tools have helped strengthen Meta’s core business.
The company’s Advantage+ advertising technology remains an important component of its strategy to improve campaign performance and automate advertising processes.
Strong advertising revenue also provides Meta with substantial financial resources to support investments in artificial intelligence and emerging technologies.
Meta Forecasts Stronger Fourth-Quarter Revenue
Meta expects revenue to reach between $73 billion and $76 billion during the fourth quarter of 2026.
The midpoint of this forecast exceeds Wall Street’s previous expectations, signaling confidence in continued growth across the company’s advertising operations.
However, Meta also increased its full-year expense guidance following the significant legal charge recognized during the third quarter.
The company now expects total annual expenses of approximately $175 billion to $179 billion.
Excluding the third-quarter legal charge, Meta anticipates that its full-year operating income will exceed the level recorded in 2025.
These forecasts highlight the contrast between strong underlying business performance and the rising costs associated with legal obligations and technology investments.
Meta AI Spending Could Reach $145 Billion in 2026
Artificial intelligence remains a central priority in Meta’s long-term investment strategy.
The company expects full-year capital expenditures of $135 billion to $145 billion, including principal payments on finance leases.
Much of this investment is directed toward expanding data centers, computing infrastructure and advanced AI development.
Meta’s strategy focuses on strengthening its existing advertising business while developing new AI-powered products and services.
However, such substantial spending creates important questions about profitability and cash flow.
How Could Meta’s AI Investments Affect Free Cash Flow?
Large capital expenditures can place short-term pressure on free cash flow, even when revenue and operating cash generation remain strong.
Meta reported $32.79 billion in operating cash flow during the third quarter.
However, capital expenditures, including finance lease principal payments, reached $34.91 billion.
Consequently, Meta recorded negative free cash flow of $2.12 billion, compared with positive free cash flow of $10.63 billion a year earlier.
This development illustrates how rapidly expanding infrastructure investment can absorb cash generated by an otherwise profitable business.
Over the longer term, Meta will need to demonstrate that its AI investments can generate sufficient additional revenue, improve operating efficiency or create profitable new business opportunities.
Meta Approves New Nonvoting Class C Shares
Alongside its earnings announcement, Meta’s board approved the creation of a new publicly traded Class C common stock.
The new shares will not carry voting rights and are scheduled to become effective on January 19, 2027.
Under the proposed structure, existing shareholders will receive one Class C share for every outstanding Class A or Class B share they hold.
The distribution will take place through a one-time stock dividend.
Meta expects the transaction to produce an economic effect similar to a two-for-one stock split, with the market price of Class A shares adjusting accordingly.
However, the distribution will not change shareholders’ existing voting power.
Why Is Meta Introducing a Nonvoting Share Class?
The new Class C shares are intended to provide greater flexibility for future capital raising, employee compensation, acquisitions and other corporate activities.
Because the shares do not carry voting rights, Meta could potentially issue additional equity without proportionately diluting existing shareholders’ voting control.
The proposal received unanimous support from a special committee of independent directors before receiving board approval.
The amended corporate structure was also approved through shareholder written consent.
The decision reflects Meta’s efforts to balance ambitious long-term investment plans with its existing corporate governance arrangements.
Zuckerberg Highlights Early Success of Muse AI
During Meta’s earnings conference call, Mark Zuckerberg discussed the company’s progress with Muse, one of its emerging artificial intelligence products.
According to Zuckerberg, approximately 25% of users who downloaded Muse were using the product daily.
The early engagement figures suggest encouraging initial interest, although the product’s long-term revenue potential remains uncertain.
Meta plans to develop Muse into a broader AI ecosystem capable of supporting collaboration between intelligent agents.
These AI agents could eventually perform more complex tasks and interact across different applications and services.
However, Zuckerberg acknowledged that Muse currently requires substantial computing resources.
Meta expects improvements in computing efficiency to reduce operating costs over time and potentially strengthen the product’s profitability.
The company is therefore investing heavily in AI infrastructure before the full commercial potential of its newer products has been established.
Reality Labs Continues to Record Operating Losses
Meta’s Reality Labs division, responsible for virtual reality, augmented reality and related technologies, continued operating at a loss.
However, the division’s quarterly operating loss was smaller than analysts had anticipated.
Reality Labs recorded an operating loss of approximately $4.13 billion during the third quarter.
Meta expects the division’s full-year losses to total between $18 billion and $19 billion.
The company has indicated that it plans to prioritize artificial intelligence investments while seeking improvements in Reality Labs’ financial performance.
These efforts reflect a broader shift toward technologies that management believes could generate stronger commercial opportunities.
What Comes Next for Meta Stock and Its AI Strategy?
Meta’s third-quarter earnings demonstrate the continued strength of its digital advertising business.
Revenue growth, improved engagement and stronger-than-expected earnings have provided support for the company’s ambitious artificial intelligence investments.
However, rising infrastructure costs and negative quarterly free cash flow highlight the financial challenges associated with expanding AI operations.
Investors will also evaluate how the new Class C share structure could influence future financing decisions and corporate governance.
Meanwhile, the commercial development of Muse, Business Agents and other AI products will remain important indicators of Meta’s ability to generate returns from its investments.
Ultimately, Meta’s long-term outlook will depend on whether its expanding AI capabilities can translate into sustainable revenue growth, stronger profitability and improved cash flow.
